INFLUENCE OF BEHAVIORAL BIASES AND PERSONAL FACTORS ON CREDIT DECISION-MAKING: EVIDENCE FROM BANKS IN KARACHI, PAKISTAN

This study investigates the impact of behavioral biases and personal factors on the credit decision-making of bank managers in the Greater Region of Karachi. While prior research has extensively examined credit decisions in developed economies, there is limited empirical evidence from emerging markets, where cultural, institutional, and managerial contexts may alter the influence of psychological biases. Using a survey of bank credit managers, the study applies Partial Least Squares Structural Equation Modeling (PLS-SEM) and independent samples t-tests to examine how overconfidence, risk aversion, status quo bias, and other personal factors affect decision-making. The results indicate that all explanatory variables, except for the education level of loan applicants, significantly influence credit decisions. These findings highlight the importance of recognizing behavioral biases in credit decision-making and suggest that targeted training and awareness programs can enhance managerial judgment in banks. This study contributes to the behavioral finance literature by providing empirical evidence from an emerging economy, offering both theoretical and practical insights for improving banking operations.